Bowman (BWMN) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Thursday, March 5, 2026, at 9 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Gary P. Bowman
• Chief Financial Officer — Bruce J. Labovitz
• Chief Operating Officer — Dan Swayze

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Gross Revenue -- $129 million for the quarter, sustaining a revenue run rate above $500 million for two consecutive quarters.
• Net Service Billing (Net Revenue) -- $14.6 million for the quarter, representing a 16.2% increase year over year.
• Net-to-Gross Ratio -- 89% for the quarter, up 200 basis points compared to last year, and maintained at 89% for the full year.
• Full-Year Results -- Gross revenue was $490 million and net revenue was $434.8 million, each up 14.5% year over year; both maintained an 89% net-to-gross ratio.
• Organic Net Revenue Growth -- 12.4% for the year and 11% for the quarter, excluding revenue from acquisitions UP E3I, SOLAs, and RPT.
• Gross Margin -- 55% for the quarter (up 190 basis points) and 53.4% for the year (up 120 basis points year over year).
• SG&A and Combined Overhead -- SG&A decreased 250 basis points, and combined overhead dropped 400 basis points compared to the prior year.
• Pretax Net Income -- $11.2 million for the year, compared to a loss of $8.9 million in the prior year.
• Net Income -- $12.8 million for the full year, up from $3 million a year ago.
• GAAP EPS -- Basic EPS was $0.74 and diluted EPS was $0.73, each up 300% year over year.
• Adjusted EPS -- Basic adjusted EPS was $1.72 and diluted adjusted EPS was $1.68, up nearly 40% year over year.
• Backlog -- Record backlog ended at $479 million, a 20% increase, with the power and utilities segment as the primary contributor; excluding acquired backlog, backlog increased 18.5% to $473 million.
• Operating Cash Flow -- $35.8 million for the full year, up nearly 50% from $24.3 million in the prior year.
• Net Debt -- $179 million at year-end, following the all-cash acquisition of RPT Alliance.
• Leverage -- 2.45x trailing twelve months and 2.06x the midpoint of fiscal 2026 guidance.
• Credit Facility Expansion -- Increased maximum borrowing to $250 million, with approximately $150 million in available liquidity as of the call.
• Stock Repurchase -- Repurchased $18.8 million of common stock during the year at an average price of $27.51 per share.
• Revenue Mix by Market -- Transportation: 21.2%, Power and Utility: 22.4%, Natural Resources: 11.5%, Building Infrastructure: 44.9%.
• Geospatial Operations -- Represented about 26% of gross revenue and contributed across all verticals.
• Public-Funded Work -- Approximately 30% of total gross revenue derived from government or publicly funded assignments.
• CapEx Guidance -- Expected average capital expenditures are 3%-4% of revenue, with potential for a slightly higher year due to fleet and asset investments.
• 2026 Guidance -- Net revenue projected at $495 million–$510 million; adjusted EBITDA margin guided to 17%-17.5%; gross revenue expected at $563 million–$580 million at an 88% net-to-gross ratio.
• Organic Growth Outlook -- Management expects over 12% organic net revenue growth (excluding RPT's 2025 and 2026 revenues).
• Cash Flow Conversion Potential -- Management states that reducing net working capital investment by 25% could improve cash flow conversion by 7–8 percentage points.
• Tax Rate Outlook -- Projected effective tax rate is "in that high teen 20 kind of range" after accounting for permanent R&D credits.
• BIG Fund Status -- About half of the planned $25 million internal technology fund is already committed to projects; additional funding is planned over the next 12–18 months.
• Integration of RPT Alliance -- "integration there is well ahead of any other acquisition that we have done," and extends LNG and midstream natural gas capabilities.
• Order Flow and Backlog Conversion -- Backlog turn expected at 70%-80% annually, per management's historical trend.
• Book-to-Burn Ratio -- Book-to-burn ratio remains over 1x; management notes "sales this quarter outpacing" the previous quarter.

SUMMARY

Bowman Consulting Group Ltd. (NASDAQ:BWMN) reported record full-year results marked by double-digit revenue and profitability growth, increased gross margins, and a significant strengthening of its balance sheet. Management highlighted enduring demand in transportation, power and utility, and natural resources, with high public sector exposure and a steadily diversifying project pipeline. Ongoing investment in advanced geospatial and AI-enabled technology was emphasized as a cornerstone of operational leverage and client retention, supported by the deployment of the BIG Fund and recent expansion of the firm's credit facility. The company increased its 2026 net revenue and adjusted EBITDA margin guidance, with management affirming a priority on organic growth while maintaining capacity for selective acquisitions and innovation-focused investments. CEO succession was addressed directly, with assurances of leadership stability, key personnel retention measures, and ongoing execution of the existing growth strategy.

• The company completed the all-cash acquisition of RPT Alliance, rapidly integrating its operations and extending Bowman Consulting Group Ltd.'s LNG, midstream, and cross-selling capabilities.
• Infrastructure and vertical diversification were cited by management as insulation against market weakness, with no segment identified during the call as showing notable decline.
• Government shutdown delays affected year-end collections, temporarily extending receivables and working capital levels. Management expects these effects to normalize in 2026.
• Approximately 30% of gross revenue now originates from public sector clients, supporting ongoing backlog and visibility.
• Workflow process automation, data integration, and AI investments are projected to improve margin leverage and cash flow conversion as digital services expand.
• "Incumbency" created by geospatial technology investments, such as renewals with the U.S. Army Corps of Engineers, was described as a central driver for repeat business and entry barriers.
• Main margin expansion levers cited include improved labor utilization timing, service automation, and integration of higher-margin acquired businesses.
• Management stated that leverage episodically may rise for M&A, but remains committed to a pro forma net leverage target of 1.5x–2x.
• Revenue guidance weights more growth to the second and third quarters, with expected full-year revenue distribution of approximately 47% in the first and fourth quarters and 53% in the second and third.

INDUSTRY GLOSSARY

• Book-to-Burn Ratio: The ratio of new project bookings to revenue "burn" (recognition), measuring pipeline growth efficiency and business sustainability.
• Net-to-Gross Ratio: Percentage of net revenue (after subcontractors and pass-throughs) versus total gross revenue, indicating operational efficiency and project mix.
• Adjusted EBITDA Margin: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-recurring items, expressed as a percentage of revenue for performance benchmarking.
• Backlog Turn: The portion of the project backlog expected to convert into revenue within a defined period, usually twelve months, serving as a forward visibility indicator.
• BIG Fund: Bowman's internal $25 million technology incubator, funding employee-driven innovation and digital transformation initiatives.
• Port Asset Conditions Kit (PAC): A proprietary digital platform providing GIS-enabled, digital twin-based lifecycle asset management for port and marine operators.

Full Conference Call Transcript

Gary P. Bowman: Okay. Thanks, Becky. Good morning, everyone, and thanks for joining our year-end earnings call. Bruce Labovich, our CFO, is with me this morning, along with Dan Swayze, our Chief Operating Officer. First, I would like to welcome all new Bowman Consulting Group Ltd. employees who joined us this quarter, including those from RPT Alliance who joined in December. After my introductory remarks, I will turn the call over to Bruce, who will cover our financial performance and technology initiatives, and then Dan will discuss operational successes, including where we are winning and why. I will end the call with some closing statements before opening it to Q&A.

Going forward, we plan to periodically introduce members of our leadership team to provide deeper insight into specific aspects of our business. Let us start with fourth quarter and full-year results. You know, it is hard to believe that 2025 was our fourth full year as a public company and the final year of our emerging growth company status. I am pleased to report that we delivered another record year as we advanced our efforts to become an ENR Top 50 firm. We achieved our goals of generating double digit in gross revenue, double digit growth in gross revenue, organic net revenue, and adjusted EBITDA. In addition, we increased our capture rate for public contracts with growth of approximately 28%.

We entered 2026 with a record backlog of over $479,000,000, a 20% improvement over the prior year. We strengthened our position in our existing markets through acquisitions, acqui-hires, and organic workforce expansion. Our increasing breadth of services, growing scale, and redoubled commitment to relationship building produced new order growth for the year that was particularly strong in power utilities, transportation, and natural resources, all of which are markets where we are seeing increased, durable, long-term demand. Our book-to-burn ratio continues to be over 1x, a level which I am proud to say we have achieved consistently since our public debut in 2021. The 2026 is so far no exception, sales this quarter outpacing the fourth quarter.

With the successful acquisition and integration of several consequential acquisitions during the year, and these results as a springboard, I am confident we are positioned for another breakout year in 2026. With that, I will turn the call over to Bruce to review our financial performance in greater detail. Bruce? Great. Thanks, Gary.

Bruce J. Labovitz: I am going to start with a little off-script nod to Gary in light of recent announcements. When I came to Bowman Consulting Group Ltd. in 2013, we were a $50,000,000 company with around 450 employees. Gary's vision of achievement at the time was a diversified $100,000,000 revenue company where people could thrive and grow. For the past thirteen years, he has been deliberate in his leadership with a conviction about growth and a steadfast commitment to our culture. So, with $490,000,000 in revenue to end the company's thirtieth anniversary year, and 2,500 committed professionals living our values every day, I think it is fair to say Gary is qualified for membership in the Overachievers Club.

On behalf of everyone at Bowman Consulting Group Ltd., I want to publicly thank you for all you have done. Okay. Turning to the fourth quarter and full year 2025, I am pleased to be here today discussing another breakout year for Bowman Consulting Group Ltd. With quarterly gross revenue of $129,000,000, we have now had two consecutive quarters at a revenue run rate of greater than $500,000,000. Net service billing, which we use interchangeably with net revenue, was $14,600,000 in the quarter, up 16.2% compared to last year. At an 89% net-to-gross ratio, up 200 basis points over last year, gross was disproportionately achieved through net revenue.

For the full year, gross and net revenue were up 14.914.5% to $490,000,000 and $434,800,000 while maintaining a net-to-gross ratio of 89%. We again generated double digit growth of organic net revenue at 12.4%. Gross margin for the quarter was 55%, up 190 basis points from last year, and 53.4% for the full year, up 120 basis points over last year. SG&A for the full year was down 250 basis points compared to the prior year. Combined overhead for the year, in other words, the combination of all labor, both direct and indirect with SG&A, was down 400 basis points compared to the prior year.

We believe this reflects an evolving mix of business in the scaling strategy we have been working towards for several years. Pretax net income for the year was $11,200,000 as compared to a loss of $8,900,000 in the prior year. Net income was $12,800,000 for the full year as compared to $3,000,000 for the prior year. With issues related to research and experimentation capitalization resolved, tax benefits had a lesser impact on our fourth quarter and the full-year results. Moving forward, tax is projected to have a more normalized impact on our statements, including simplifying the calculation of changes in working capital on our operating cash flows, no longer splitting the effect above and within the working capital.

With Section 174 capitalization no longer an issue, it is key to note that we do still benefit from other permanent research and development credits that reduce our effective tax rate and never expire. We believe the turnaround in pretax GAAP profitability this year is the result of the improved labor utilization, scale, and full integration strategy we have been executing to achieve efficiency in operations. We are pleased to see meaningful increase in EPS, both GAAP-based and adjusted. On a GAAP basis, our basic and diluted EPS of $0.74 and $0.73 were up 300% year-over-year. On an adjusted basis, our basic and diluted EPS of $1.72 and $1.68 were up nearly 40% from the prior year.

Holding our share count through buybacks also helped. With absolute growth in all market verticals this year, we continue to advance our objective of increased revenue diversification. Revenue distribution continued to shift positively in 2025, with transportation at 21.2%, power and utility at 22.4%, natural resources at 11.5%, and building infrastructure down to 44.9%. We expect this trend and trajectory to continue in 2026. Our geospatial operations continue to be increasingly consequential and represented approximately 26% of 2025's gross revenue as a service that was spread across all markets.

In the aggregate, around 30% of total gross revenue was derived from government or public funded work assignments, an area where we expect to continue to grow over the short and long term. Organic net revenue growth was 11% in the fourth quarter and 12.4% for the full year, excluding UP E3I, SOLAs, and RPT. Broken down by vertical for the quarter and for the full year, Natural Resources led the way with 2927% growth, and utilities delivered 1113% growth. Transportation grew 622%. And building infrastructure was up 96%. Organic growth rate in transportation in the fourth quarter was a function of delayed contracting and notices to proceed in 2024.

While we caught up in 2024, the delay created a skewed growth curve for the year. All is well within our transportation business, and we continue to win consequential new awards. I think it is also worth pointing out the steady increase in organic net revenue growth in building infrastructure throughout the year. I am optimistic that this represents a developing trend for that market. Backlog increased 20% to $479,000,000 on 12/31/2025, up from $399,000,000 at the 2024. While every vertical is up, the biggest gainer was power and utilities, where we were particularly active with business development and acquisitions. Excluding purchase backlog in place at year end, the increase was 18.5% at $473,000,000.

Sales of new work after closing an acquisition would not be considered acquired backlog. In the case of RPT, while we have very strong visibility into projects and schedules, work is released in more frequent phases that keep their forecasts high but their backlog low relative to the overall companies. Cash from operating activities for the full year increased by nearly 50% to $35,800,000 from $24,300,000 in the prior year. Net working capital increases adjusted for the UTP changes represented the equivalent of a roughly four-month investment in gross revenue. Reducing that investment by 25% through process automation and operational efficiencies could add seven to eight percentage points to cash flow conversion.

This is high on our to-do list in 2026. Net debt at the end of the year was $179,000,000, including the all-cash acquisition of RPT on December 5. Leverage was 2.45x trailing twelve months, and 2.06x the midpoint of our 2026 guidance. We expect increased cash flow from operations during the year to continue to reduce this debt throughout 2026. On March 3, we executed a third amendment to our credit facility with BofA, TD Bank, and PNC to increase the maximum borrowing to $250,000,000. We increased the facility to ensure we have sufficient access to affordable capital to continue funding investments in organic growth, innovation and efficiency, accretive acquisitions, and stock repurchases.

As of today, we have available liquidity of approximately $150,000,000. During 2025, we periodically repurchased $18,800,000 worth of our common stock at an average price of $27.51 per share. We continue to view stock repurchases as a means of addressing liquidity and valuation dislocations, as opposed to a commitment to the return of capital. Assuming market stability and a rational valuation of our equity, our top priorities remain investment in organic and inorganic growth. We remain steadfast in our commitment to investment and innovation.

The BIG Fund, our internal technology incubator, is funding ideas presented by our employees to make impactful investments that advance our capabilities, improve the efficiency of our workforce, and decouple revenue growth from headcount growth, increase the value of our services, and extend customer engagement. It is admittedly a tricky time in our industry with respect to innovation in AI. We need to be sure we are prioritizing investment in processes and services relating to deliverables sold at stable values, as opposed to efficiencies that merely cannibalize the work of work sold by the unit.

We are making significant investments this year in our fleet of geospatial imaging assets, including high-resolution, high-altitude scanners, along with improved capture vehicles, including planes, UAVs, drones, boats, all of which increase collection rates and data processing efficiencies by as much as 30% to 40%. We continue to integrate the technologies we have developed in-house with tools we purchased in the recent Orcus acquisition, and we are launching PAC, our Port Asset Conditions Kit, which provides GIS-enabled, digital twin-based life-cycle asset management to port and marine operators.

As opposed to the traditional software-as-a-service subscription model, we have put forward a services-powered-by-software model that engages our integrated digital platforms with customers through a professional services arrangement that combines process automation and professional intervention. As we develop our suite of AI- and GIS-enabled tool sets, we believe we are well positioned to monetize the library of assets in our growing digital services and advisory practice into a unique value proposition for our customers and shareholders. In connection with yesterday's release, we increased our full-year 2026 guidance to a range of $495,000,000 to $510,000,000 and an adjusted EBITDA margin of 17% to 17.5%. At an 88% net-to-gross ratio, this would represent $563,000,000 to $580,000,000 of gross revenue.

Increased net revenue guide includes the recent RPT acquisition without contemplating any future acquisitions. At the midpoint of our net revenue guidance, this represents approximately 16% absolute growth over last year. Pro forma, to exclude RPT's 2025 revenue from the basis and from next year, from this year, we are projecting just over 12% organic net revenue growth. We expect revenue during the year to again be nonlinear, with the first and fourth quarters representing around 47% of net revenue and the second and third to be around 53% of net revenue. This should not be construed as quarterly revenue guidance, but rather as a guideline for relative weighting of the quarters throughout the year.

I am now going to turn the call over to Dan Swayze, our Chief Operating Officer, who is joining us today to provide insight into the question of where we are winning and why. Dan has been with Bowman Consulting Group Ltd. for over three and a half years, and spent two decades in senior leadership roles in civil and engine and energy-related engineering. At Bowman Consulting Group Ltd., Dan's focus as the Chief Operating Officer is on the management and execution of our portfolio of services across markets. Dan, welcome.

Gary P. Bowman: That is nice, Bruce. Thank you.

Dan Swayze: Thank you, Bruce, and good morning, everyone. I know a lot of our team is listening to the call today, and I sincerely thank them for all they do and their commitment to Bowman Consulting Group Ltd. I am very proud of our team. Today, I am going to focus on where we are winning in the market and why those wins are becoming increasingly repeatable. In other words, our right to win. Over the past several years, we have been deliberate about building differentiated capabilities in markets where technical depth, geographical reach, capacity, execution consistency, and integrated end-to-end ability creates a competitive advantage. Our acquisition strategy across the country created integrated service delivery teams in our various markets.

In our data center and mission critical practice, we are increasing our win rate by meeting our clients where they are. Data center programs are rarely single-service projects. They are multiphase, multiservice opportunities. For example, combining the electrical and mechanical engineering forces from our E3 acquisition, the fire and life safety design services from our Fisher acquisition, with our established capabilities in civil planning and engineering, we have a strong service offering our clients can rely on. Our ability to deliver consistent technical standards across jurisdictions while maintaining strong relationships positions us as a long-term partner rather than a one-time design provider.

As major operators continue to deploy capacity into new regions, we are following them into those markets, pairing local engineering knowledge with the strength of our national platform. As a result, we are expanding wallet share and deepening our engagements in a durable growth market. This approach increases client stickiness. The power utility sector remains a robust market for our organization, spanning electric, oil and gas, as well as renewables. Bowman Consulting Group Ltd. is actively involved in supporting the development and expansion of new power supplies for utilities, addressing the evolving and urgent need for bridging power for data centers, and the rapid deployment of compressor stations for the midstream movement of natural gas.

The services we provide for our natural gas clients are provided through a combination of several acquisitions, including MPX, Survein, RPT Alliance, Excellence Engineering, and Burke Engineering. Our approach leverages a comprehensive suite of services, seamlessly integrating a unique collection of geospatial expertise and equipment with proven engineering solutions to address the evolving needs of our clients. This multiservice, end-to-end strategy ensures we can consistently deliver innovative, reliable, one-stop-shop outcomes across a diverse landscape of our clients' needs. Being an early establishes incumbency, and incumbency is an important element to our right to win. Our geospatial engagements often create pull-through opportunities for related engineering and advisory services.

Recent investments in new aircraft and advanced LiDAR sensors directly strengthen our competitive position. These advanced capabilities allow us to support complex infrastructure initiatives, including utility expansion both in electricity and natural gas, damage assessments, land acquisition, land development, and other large-scale public works projects. As an example, we were recently renewed for a five-year agreement with the U.S. Army Corps of Engineers to provide photogrammetric mapping and related survey services. Being awarded this renewed agreement reflects both past performance and technical differentiation. We are also continuing to build strength in transportation across the U.S., where our extensive history of time of delivery and our expansive portfolio of creative bridge and highway design create a meaningful competitive opportunity.

Our comprehensive transportation services offerings are an amalgamation of our acquisitions of McMahon, Speece Lewis, and Exeltek, and our legacy teams in the Chicago area, providing end-to-end solutions. Transportation agencies prioritize demonstrated experience and capacity to deliver on comparable assets. The depth of our expertise and project experience in these regions drives repeated wins. Across these markets and others we participate in, the pattern is consistent. We win where specialized technical expertise matters. Past performance and incumbency create barriers to entries to our competitors. Our national presence enhances client value, and our integrated geospatial and engineering delivery improves client outcomes.

Our operational investments, including workflow modernization, data integration, and selective automation using AI and machine learning, support these markets by improving throughput and timely delivery of superior outcomes. These investments are in service of a larger objective to strengthen our competitive standing in the market where we see durable demand and long-term growth potential. We are not pursuing growth indiscriminately. We are concentrating on efficient use of capital, leveraging our talent, and embracing technology in markets where we have established credibility and where our integrated platform creates measurable differentiation and competitive advantage. The result, we continue to successfully deepen client relationships, enhance our right to win multiservice assignments, and strengthen our foundation for sustained revenue growth.

Our competitive position in the industry has never been stronger, and our right to win continues to broaden throughout our markets. With that, I will turn it over to Gary.

Gary P. Bowman: Great. Thanks, Dan. As Bruce mentioned, our focus on execution, organic growth, and strategic acquisition was evident in our results. We exited 2025 with strong momentum, some of the best margins in the E&C group, and a backlog which foreshadows another year of double-digit revenue growth. We enter 2026 with a renewed focus on disciplined growth and continued operational improvement along our service platform. While change in the occupant of the CEO chair is ahead of us, the core of this company, its senior leadership and professional workforce, is as intact, cohesive, and aligned in its mission.

With the exceptional talent we have at every level of this organization, I am really excited for the future of the company I founded some thirty years ago. With that, I will now turn the call back to Becky for questions.

Operator: Thank you. Please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Aaron Spychalla from Craig-Hallum. Your line is now open. Please go ahead.

Aaron Michael Spychalla: Yes, good morning. Thanks for taking the questions. First, maybe on the RPT acquisition. Good morning. Thanks. On RPT, you know, can you just maybe talk a little bit about, you know, what that brings to your offering, you know, and early on just how integration is going there and kind of potential synergies within the platform? And then maybe second on EBITDA margins. You know, good performance in the quarter, 17.3%. Just thinking about the guidance for 2026, were there anything, you know, noteworthy from a driver perspective in the fourth quarter? And what are some of the factors you are incorporating for 2026, and how are you thinking about potential for upside there?

Gary P. Bowman: Morning, Aaron. Yes. I will start off with the second part of the question. Actually, integration there is well ahead of any other acquisition that we have done. It is pretty much, you know, integrated from an operating and financial perspective. It is on its way from a platform perspective. And so we jumped right on that one because the, you know, the opportunity is right ahead of us to grow that business in connection with the rest of the components of Bowman Consulting Group Ltd. And so it is integrated. It really extends our product offering in LNG. I will let Dan talk for a second about the extension of the LNG and data center product offering.

Dan Swayze: Yes. If you go back to what we talked about a minute ago and you think about our right to win, RPT's skill set and client reach puts us right into the whole midstream movement of natural gas. Feeding liquefied natural gas centers also gives us that opportunity to provide more consulting engineering services for those building pipelines. I will also say we have already been successful in several cross-selling efforts where, you know, the combination of services has gotten us into projects that we otherwise probably would not have been necessarily a lead contender for.

Bruce J. Labovitz: Yes. Again, I think, Aaron, we have demonstrated that, you know, that margin is not necessarily always consistent, you know, throughout the quarters, but then we look at the year as being able to deliver from what was the sixteen, you know, high sixteens this year to what we think will be mid sixteens, you know, next year. So it is continuous improvement in margin. It always has to do with the timing of the acquisition of labor relative to the starts of projects. That is our biggest driver of margin in any particular period, is the, you know, how well we time the collection of labor with the realization of revenue.

So I think that we continue to, as we scale, grow margin over overhead, and as we implement, you know, better and better workflow process automated processes, we optimize labor. So I think we can increase by another, you know, we are projecting another, you know, 50 to 50 plus basis points of margin expansion this year, 50–80 points, and I think those are the key drivers.

Aaron Michael Spychalla: Alright. Thanks for taking the questions, Gary. You know, congrats on the retirement, and best of luck to everyone moving forward.

Gary P. Bowman: Thank you, Aaron. Thanks.

Operator: Thank you. Our next question comes from Mincho from Texas Capital Bank. Your line is now open. Please go ahead.

Mincho: Good morning. Great. Thank you very much, and congrats on a really strong year. You mentioned that the building segment saw some organic growth this quarter and that there were some developing trends. Can you talk a little bit about the opportunities that you are seeing there? Also, on Slide eight, you provided some gross margin by vertical, and I was just wondering if you can talk about how that has trended over the last few years. I am assuming that it is kind of expanded just with the scale that you have. But can you talk a little bit about expectations for 2026, just directionally?

And then just finally, your natural resources segment obviously had strong organic growth this quarter and just in the year. And I do not think Dan spoke too much about that segment, but can you just provide a little more detail about where that demand is coming from? Seeing any green shoots there?

Gary P. Bowman: So is that put at work optimistic that this is a developing trend. I am not sure we are ready to call it yet. I think one thing that we are expecting to see at some point is a focus on affordability of housing. And we are already seeing it at the state level. You are seeing the requirements for permitting being loosened and stimulus for more affordable housing. That is where we really thrive, is in creating supply for builders and for the home building and multifamily market. So we saw some good positive movement there. It is geographical in nature. Some pockets of the country, you know, are better at times than others.

But we are optimistic that is an early indicator of, you know, some opportunity for bigger growth in that market again.

Bruce J. Labovitz: Across the—you mean, you broke up a little bit there, so I think the question was about the gross margins by vertical and expectations on those for the year, I am going to assume that was the question. Yes. And so it is consistent with where we were in the third quarter when we started reporting on gross margin by vertical, with transportation being more of a cost-plus kind of market, but with longer-term commitments and longer engagements that reduce turnover costs there and create stability in workforce. And we think that the other three markets continue to have favorable gross margins, and I do not see anything that is going to erode those throughout the course of this year.

If anything, processes, you know, process automations can help to improve those slightly.

Gary P. Bowman: Yes. So in some respect, that is a little bit of the catchall for what does not fit into categories, but it includes environmental, it includes mining, it includes water resources, it includes agricultural imaging and orthoimaging, and it includes land services associated with assisting landowners in acquisition of easements and other rights of way when it is not land acquisition for a power utility or for a road, bridge, or highway. So it is a large category for us in terms of the number of things that fit in there. A lot of exciting projects that, you know, are developing in that area, particularly with water resources, particularly with high-altitude aerial imaging, and in the land services business.

Operator: Thank you. Our next question comes from Andrew John Wittmann from Baird. Your line is now open. Please go ahead.

Andrew John Wittmann: Hey, great. Good morning, and thanks for taking my questions. I have a few here. So where do I want to start? I guess I do not know. Maybe I am reading into it too closely, but in your press release, it talked about 2026 being—I forgot the exact terminology—more of an organic year. That sounds like a little bit of change. You said in your script here that your priorities are still organic growth and inorganic growth. And so just feels like maybe there is a change there. Is there more kind of organic focus in '26 than in the past? And if that is correct, why the change?

And then, Bruce, in your comments, you talked about some things that are going to be kind of a priority on collecting working capital this year. Could you just elaborate on that a little bit more? It does feel like there is some working capital opportunity, maybe at lots of places, including your receivables. What is a realistic goal here for DSOs and progress through '26? And then a couple of model-focused ones: you talked about a more normalized tax rate—what is the effective tax rate that you think is applicable here in '26? And on seasonality, last year the second quarter adjusted EBITDA margin was higher than the third quarter, which is atypical.

Should we expect the higher margin in the third quarter than the second quarter in '26, or is there a reason that last year’s pattern would repeat?

Gary P. Bowman: Andy, this is Gary. There is really—there is not a fundamental change. We are still committed to inorganic growth. We are a little narrower in our focus with strategic and moving toward bigger opportunities. So you are seeing maybe a less frequent—certainly less frequent—announcements. But we are just as committed as ever to a strong growth of a strong combination of inorganic, inorganic growth.

Bruce J. Labovitz: I think there is an evolving nature of the market that there is opportunity to invest in the expansion of our services, right, through investment in technologies and innovation, and that is all organic. So, you know, we continue to be investing in expansion of our capabilities, expansion of the capability of our workforce to generate revenue. But as Gary said, I think we will do less frequent small—yeah, but still be focused on acquisition. And in the meantime, be focused on internal investment in organic growth. But thanks for bringing it up, because I think it is an important—absolutely—point of distinction there. We want to clarify that.

Bruce J. Labovitz: Yes. One thing I will point out that, you know, we are already so far past in the year, it is hard to remember that at the end of the year, there was a government shutdown, and that did slow collection on a portion of our receivables. Not because they were not collectible, but just because, you know, getting them processed was slower in a portion of our business. So it gives a little bit of extension of receivables from that artificial impact. Getting work through working capital is an important focus for us.

Certainly, getting work to be billable—not necessarily that we are not earning it—but getting it to the point of billing and collecting it, you know, is something that, you know, we are working towards narrowing down. And so I think reducing, let us say, work in process, which is a component of working capital, will be a focus this year. And, you know, we are always working on collections, Andy. It is one of the great challenges that, you know, never seems to completely get solved. But between that, between—you know, we implemented a new—not a new—we upgraded our ERP system throughout in 2025.

We think that will help facilitate the process of processing work to—follow on Bruce's point, always work on the collections. The thirty, thirty-one some years, we—it is in our DNA. We have to keep the cash flowing.

Bruce J. Labovitz: Yes. I would say that it is, you know, on our statutory, less our R&D credits, it is somewhere in that high teen 20 kind of range.

Bruce J. Labovitz: No. I do not think it is necessarily a repeatable pattern from last year. I think we had a—we talked about it in the second quarter of last year—there were a few exceptional items that, you know, sort of hit on all cylinders. I am indicative of—I think that, you know—yeah. I would not necessarily say that is a pattern permanently.

Gary P. Bowman: Thanks, Andy.

Operator: Thank you. Our next question comes from Tomo Tomasano from JPMorgan. Your line is now open. Please go ahead.

Tomasano: Good morning. Thank you. And, Gary, although we have only recently met, I would like to express our respect and appreciation for your leadership and culture as you prepare for your retirement. I would like to kick off: you raised your 2026 net revenue guidance to $495 to $510,000,000. Which segments or projects are driving this upward revision and/or your current $479,000,000 backlog? What proportion do you expect to convert to revenue in 2026? And as a follow-up on the upcoming CEO transition, could you talk about how you are ensuring management stability and continuity? Are there any qualitative KPIs or targets related to succession and strategic continuity?

Gary P. Bowman: Thank you, Tomo.

Bruce J. Labovitz: Generally speaking, Tomo, we turn somewhere between 70–80% of backlog in a year. In a twelve-month period. So I think it is a little longer. Sometimes it gets a little shorter. But generally speaking, we think of 70% to 80% of backlog in any moment as having a twelve-month tail to it. In terms of where we think we are going to continue to see growth, obviously, power is an area that we expect to, you know, to contribute to the growth year-over-year. A big chunk of that guidance increase was from the acquisition of RPT that happened after last quarter's conference call. So that is all power-related in that bit of the increase.

The rest of it is between natural resources and transportation. Transportation.

Gary P. Bowman: We are—we—effective communication. We are doing retention, economic retention packages for some key people. And, really, the communication, the assurance of the continuation of our culture. So, you know, a qualitative view of success in the succession is certainly retention of our key staff, retention of our leadership, and continued forward execution of our strategic plan.

Bruce J. Labovitz: Yes. We have got 2,500 people who depend on the continued success of this company every day, and we take that responsibility very seriously. And, you know, the Board takes that responsibility very seriously. And so we are all wholly committed to the long-term successes. We are all invested in the long-term success of this company and in seeing this through without any disruption in service to our customers, in service to our employees, and, you know, in value generation to our shareholders. You know, I will also follow-up there, Tomo, as a member of the Board, I am not on the search and selection committee, but certainly I have input.

But I would not have made this move if I did not have great confidence in the Board getting this right both for the legacy—my legacy, candidly, personal legacy, and my personal economics. I am still the largest single shareholder in the company, and I intend to continue to own a tremendous amount of the stock in the long run. So I have a real vested interest in the success.

Tomasano: Thank you very much. That is all from me.

Operator: Thank you. Our next question comes from Liam Burke from B. Riley Securities. Your line is now open. Please go ahead.

Liam Burke: Good morning, Gary, Bruce, Dan. Gary, congratulations on your retirement. When you reach critical mass here on the front end of the infrastructure project, has there been any competitive pushback from some of the larger specialty contractors that are looking to move into your space, since it is probably the most profitable piece of the project? And across the board, you had good growth across all your business segments. Do you see any pockets of weakness, or is your diversification allowing you to move right past it?

Bruce J. Labovitz: Are you talking about in the power space or—sorry, infrastructure writ large, Liam?

Liam Burke: Power space? Let us go infrastructure at large.

Bruce J. Labovitz: Yes. There is a real line of distinction in the industry between, I would say, the construction companies—I think that is what you are asking about—and the engineering firms. And while there is a collegial relationship between, we have not felt threatened. Dan, you can tell if you have, you know, felt it from the ground up, from, let us say, specialty construction contractors trying to make their way into the engineering world.

Dan Swayze: No. In some cases, we are working for those contractors. So it is not really a threat that we see.

Bruce J. Labovitz: Yes. If anything, I would say it is drawn the other way, in that there is such a resource constraint in this space that, you know, it is an all-hands-on-deck kind of mindset. And there are functions of the construction process that the specialty contractors need help with. The equipment providers, the GCs, you know, need help. There is no effort to share risk on that part of the process, but there is an effort to bring in help.

Liam Burke: Mhmm. Right?

Bruce J. Labovitz: Yes. Right now, I would say that there are no pockets of weakness. There is no negative, you know, connotation to any of the markets or segments. Obviously, we are keeping an eye on the growth rate of the building infrastructure space. Still our biggest and continuing to grow, and we have hopes for it to accelerate. So I would not characterize it as weakness. It is getting attention from us to make sure that, you know, we keep our staffing right and our—and all of our overhead right for that group. But on the others, as I use the same phrase, it is an all-hands-on-deck effort to try to keep up with power and transportation and natural resources.

The good news, Liam, as we have talked about, is that in our workforce, it is very fungible across the four markets. So we do not have silos of workforce that are only able to do one thing. You know, the base of our labor pyramid really is very cross-disciplined and cross-market capable. And so, you know, we focus on that kind of business model deliberately.

Gary P. Bowman: Thank you, Liam.

Operator: Thank you. Our next question comes from Jeffrey Michael Martin from ROTH Capital Partners. Your line is now open. Please go ahead.

Jeffrey Michael Martin: Good morning, Gary, Bruce and Dan. Bruce and Gary, I wonder if you could touch on RPT. I know that they were constrained for growth, and you have owned it roughly three months now. Just curious how much you have been able to staff up for RPT during the initial three months, and maybe give us a glimpse at what your hiring plans are for that business in particular, as well as touch on just general availability of labor and ability to staff up in front of larger contracts in general. And then I wanted to touch on geospatial. You mentioned that is roughly—I think 26%, 24% of your net revenue. Sounds like you are making further investments in geospatial.

Can you elaborate on general demand trends you are seeing there, and also touch on the competitive dynamic? And could you tie that into your CapEx and equipment acquired and capital lease projections for this year?

Gary P. Bowman: Yes. It is Gary. I will jump in. As we were doing our due diligence on RPT, and certainly part of the attraction is all the opportunities in the space that they are in and their being down as a single office operation in Houston. But being in Houston, there are pockets of the oil and gas industry that are—especially the oil industry—maybe up until this past week, that have been soft, and there has been a good availability of labor down there. So we have found the ability for the RPT group to staff up as flexible as any of our pieces of business.

It has been also, you know, with them becoming part of a much larger organization has given them access to staffing that has availability of utilization as well. So we have tamped down the shortage by adding capacity from our system. The other thing that we have been doing a lot of now is insourcing things that they used to outsource. Yes. And so we are finding, you know, they are using survey. They are using our fire protection. They are using our mechanical, and we are grabbing—essentially, we are grabbing more work from their clients, which is, again, putting a little more stress on the need for people.

But it is what we do for a living, is making sure that we can meet demand with supply.

Bruce J. Labovitz: Yes, Jeff. Geospatial is pretty much at the core of everything that we do. A lot of the work we do originates with imaging, processes through imaging, and utilizes survey and scanning and three-dimensional iteration throughout the life cycle of the asset. So we do not think of it as a vertical because it is a service that really supports every bit of business that we do. It is kind of at the epicenter of our services portfolio. So, you know, we are making investments in that space because it is evolving so quickly. And those that are ahead have distinct advantages, and geospatial is one of those service lines that creates, as Dan mentioned, incumbency.

Incumbency is such a valuable asset in the life cycle of asset work. So we are buying high-resolution scanners. We are buying imaging technology that does underwater LiDAR. You know, we are buying vehicles that collect data, whether that is from the air, from the water—you know, we are improving the operational efficiency of our altitude fleet, which spends a lot of time, let us say, chasing weather. And if we can shorten the chase, we get more productivity out of it. And there is plenty of work to be done there. So geospatial is—we think it is really a critical part of the overall product we deliver. And so we want to be a leader in our fleet.

Bruce J. Labovitz: It is generally included—I mean, it is included in that bucket. We may—and, again, we sort of talk about an average of 3–4% spending on CapEx. Episodically, it may be, you know, a little bit higher and a little bit lower in years. This may be one of the little bit higher years as we continue to improve that fleet. But as revenue is growing, you know, you absorb that CapEx from a percentage perspective as well. So I do not think it is going to, you know, in any way put it off the charts, but it, you know, it could pop at a point or so this year. But then these are long-lived assets.

So, you know, you buy them in one year, they last for several years.

Jeffrey Michael Martin: Thank you. And, Gary, congratulations on your retirement.

Gary P. Bowman: Thank you, Jeff.

Bruce J. Labovitz: Look forward to seeing you guys in a couple of weeks.

Operator: Our next question comes from Sharif Al Sabahi from Bank of America. Your line is now open. Please go ahead.

Nabi (for Sharif Al Sabahi, Bank of America): Good morning, everyone. This is Nabi. I am on with Nadeetha for Sharif. Just on the full-year guide, you raised the net revenues for the full year, but the EBITDA guide was maintained. Could you talk about the margin profile of recent acquisitions like RPT? Does it come at lower margin with other cost optimization measures in the business holding margin steady at 17–17.5? Or on the flip side, is it slightly accretive, and are there other temporary investments in the business that we should be aware of that are holding margins back a little bit? And also, net leverage—think you mentioned around 1.9x, just higher than historical levels. Could you remind us of your target range again?

Could we see leverage structurally closer to the high end of your range for a period of time as Bowman Consulting Group Ltd. gets more acquisitive, or is there a plan to delever to historical levels over the near to medium term? Lastly, on the $25,000,000 BIG Fund, can you give us a sense of how much has been committed versus funded, and the runway there?

Gary P. Bowman: Good morning.

Bruce J. Labovitz: Yes. So I am not sure I would characterize it as holding margins back in a sense that if we continue to grow margin, we are growing it—we are committing to grow it, you know, another half to 50 to 50 plus basis points during the year. So we are very much focused on expanding margin over time. RPT is a high-margin business. But again, as a percentage of our overall business, you know, even being a significantly higher-margin business does not necessarily drag the whole business along from a margin perspective. We think that, you know, being able to get 17.5% margins is a pretty high bar for the industry.

And I think that, you know, as—if you asked about, you know, contributors to that, certainly, sort of this concept that we introduced about decoupling revenue growth from headcount growth does not mean shrinking your workforce, but it means growing revenue faster than you grow workforce, and that increases margin. And that is from the tools that we are employing and investing in, as sort of as one of the earlier questions about organic investment and investing in these processes and service line expansions, I think, will add margin over time.

We have talked about that, you know, we believe that this is a high-teens margin business without innovation and an even higher one with, and, you know, it is a journey that we continue to be on.

Bruce J. Labovitz: Yes. So we have typically been in the, you know, the one-and-a-half kind of range. We want to—you know, the mid-ones. We made this acquisition of RPT on December 5, so did not get any of the benefit at year-end for any of the, you know, the EBITDA from that acquisition, but had all the leverage on our balance sheet. When we look ahead, it is about, on a pro forma basis, about 2x. That is before we start paying that down with cash flow, you know, that we will generate from this year. So we hit 50% cash flow generation this year. We think that is going to continue to improve.

So, you know, at an EBITDA of, you know, of—in the seventeens margin on, you know, on $500,000,000 of revenue, there is going to be a good deal of cash flow to be used to pay that down. Now we will continue to be growth-oriented. And to the extent that we identify another acquisition, yeah, we would certainly—you know, there could be additional leverage from it, but there would also be significant amount of EBITDA from it. So you will see us structurally, you know, try to achieve a below 2x, keep it in that, you know, 1.5x to 2x range, which has been our sort of our target.

But we have been consistent that episodically, we will be higher as we invest, you know, in growth.

Bruce J. Labovitz: Yes. So I would say that we are roughly about halfway into it in terms of committed. It does not mean it has all been expended. There is a lot of proof of concept, a lot of proof of returns, you know, and a lot of other factors that, you know, over the next twelve to eighteen months, we would, you know, fund the projects that have come forward. Some of it is the investment in assets in geospatial that will facilitate some of these additional services. But I would say we are about halfway into ideas that would be funded.

Gary P. Bowman: Thanks so much.

Operator: As we have no further questions on the line, I will now hand back to Gary Bowman for final comments.

Gary P. Bowman: Thanks again, Becky. Well, thanks to everybody for joining us on the call today. We are very pleased with where we are at, pleased with the prospects for the year. And thanks certainly to all the employees and to our investors for all the faith that you put into us. Have a great day, everyone.

Operator: This concludes today's call. You may now disconnect your lines.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.